Estate and Gift Tax Limits

In 2020, estates of up to $11.58 million are free of tax.  Anything above $11.58 million can get taxed up to 40%. 

If you leave an estate behind that is less than that amount, the estate won't owe any federal estate tax. 

All property left to a surviving spouse passes free of estate tax.  All property left to a tax-exempt charity is also free of estate tax.

A husband and wife each get their own exemption. So each person can give away $11.58 million tax-free in 2020 (assuming they haven’t made prior lifetime gifts) to heirs and pay no federal estate or gift tax.

You can gift to individuals up to $15,000 in 2020 without triggering the gift tax.  This includes charitable gifts, gifts to spouses, gifts to political organizations, gifts of educational expenses, and gifts of medical expenses. 

You can give away up to that limit to as many individuals as you’d like. A husband and wife can each make separate $15,000 gifts in 2020.  This is not the combined total they can gift; it is the individual gift total.  So a couple could both make $15,000 gifts to each of their four grandchildren, for a total of $120,000. The annual exclusion gifts don’t count towards the lifetime gift exemption.

In addition to federal estate taxes, some states have estate taxes and inheritance taxes. In states with inheritance tax laws, taxes must be paid by the person who receives inherited property (as opposed to estate taxes which are paid from the decedent's estate). Inheritance tax exemptions and rates may vary depending on who received the property, i.e. the decedent's spouse may be taxed at a lower rate than would be a friend of the decedent. A number of states are phasing out their inheritance tax systems. 

Be sure to contact your state's tax department or consult with an estate planning lawyer, CPA or other professional.